Have Democrats Finally Found A Strategy For 2018 Midterms?

So far in the midterm election cycle there are indications that the Democrat blue wave may be foundering on a lack of policy prescriptions and an overreliance on Trump-hate. Generic ballots, which had shown a strong Democrat advantage, in early May showed a narrowing with one poll even showing Republicans up by five points. It seemed as though the combination of a rebounding economy and the lack of a coherent Democratic message may have spared the GOP. Now Democrats are coalescing around a few key messages that they believe will allow them to sweep away the Republican majority. Ironically, the Democratic talking points are stolen from Republican platforms of recent elections.

The biggest issue that Democrats hope to capitalize on is healthcare. Repeal of Obamacare has been a Republican goal since the passage of the Affordable Care Act in 2010, but after last year’s failure to pass a reform bill, the GOP has gone silent on the issue. Meanwhile health insurance premiums are increasing both for Obamacare policies and the market as a whole.

Democratic primary winners believe that the solution to the health insurance crisis is to expand Medicare to cover all Americans, a back-door plan to institute a single-payer health care system. Axios reports that Democratic candidates who support varying versions of Medicare-for-all are often winning primaries against candidates backed by the Democratic Congressional Campaign Committee.

Although it is tempting for conservatives to assume that single-payer health care would be a nonstarter for most Americans, the idea polls pretty well. A March 2018 poll from the nonpartisan Kaiser Foundation found 59 percent of Americans like the idea of Medicare-for-all. When the national health plan was made a voluntary option, the share of those in favor increased to 75 percent, including 64 percent of Republicans.

Perhaps ominously for Republicans running against the idea, 74 percent of independents favored the idea of an optional national health insurance plan. The big question is how voters in swing House and Senate districts will view the idea.

“People are increasingly happy with the Affordable Care Act, but they are increasingly unhappy with the health-care system writ large,” said Sen. Chris Murphy (D-Conn.). “I think there is a greater willingness to accept a bigger role for public programs in repairing the health-care system.”

Following the lead of Bernie Sanders, most of the potential Democrat candidates in 2020 have also endorsed some form of Medicare-for-all. A pro-single-payer Democrat running against incumbent Donald Trump, who endorsed universal health care in the 2016 Republican primary, could make for an interesting, if uninspiring, race.  

A second plan of attack for Democrats is to blame high gas prices on the Trump Administration. The high price of gasoline is caused by crude oil prices recovering after a four-year slump. Rising oil prices are caused by several factors, some of which can be blamed on the Trump Administration and some of which cannot. President Trump is not at fault for OPEC production cuts, declining oil production from Venezuela or increased demand for the summer travel season, but his policies do affect tensions in the Middle East and with China.

Donald Trump linked gas prices to presidential policy in 2012 when he tweeted, “Gas prices are at crazy levels--fire Obama!” At the time, voters rejected his advice.

Regardless of whether he is responsible, the president gets the credit for good news and the blame for the bad. High gas prices can quickly eat up the savings from last year’s tax cut for lower-income Americans as well as slow economic growth.

In early May, Patrick DeHaan of Gas Buddy told the New York Post that prices were already affected, even before Trump announced the decision to withdraw from the Obama Iran deal. “The market has already baked in that Trump is going to opt out of the Iran deal. Oil is several dollars per barrel higher because of it, DeHaan said.

“It's well known that geopolitical instability drives oil prices, and gas prices, around the world higher and higher,” said Sen. Robert Menendez (D-N.J.). “The Trump administration's chaotic approach to foreign policy not only served instability around the world, it certainly serves to drive up oil prices higher and higher.”

Neither line of attack is a sure thing for Democrats, but healthcare and gas prices finally give Democrats something other than Donald Trump to talk about. These two pocketbook issues have the potential to win independent voters over the Democratic side unless Republicans can offer a persuasive case against their ideas.

Originally published on The Resurgent

Obama and gas prices

As gas prices continue to rise, President Obama is under increasing pressure from both Republicans and the public to take action. Gasbuddy.com, which tracks gas prices, shows an increase of almost 70 cents per gallon in Georgia since Christmas. During the same period, the national average gas price has increased by almost 60 cents. The current national gas price is $3.794 per gallon, while Georgia is a few cents cheaper at $3.703. There may not be any relief in the near future. The Energy Information Administration forecasts that gas prices will stay near $4 per gallon through the summer.

To date, President Obama’s main response has been to blame speculators. In 2011, the president asked the Department of Justice to investigate oil speculators for possible fraud or manipulation of prices. McClatchy Newspapers found the Oil and Gas Price Fraud Working Group, a subgroup of the Financial Fraud Enforcement Task Force, has met “only four or five times since its creation.” President Obama ordered the group back to work last week while at the same time saying that it never stopped working.

Speculators are not the problem. OPEC is the cartel of oil-producing countries that sets the price for much of the world’s oil. The OPEC basket price for March 14, yesterday’s close of business, was $124.29 per barrel. Currently, oil is trading on the New York Mercantile Exchange between $103 and $106 per barrel. Oil is actually selling on the commodities market for less than OPEC is charging. This means that the “speculators” are actually bidding the price of oil down.

President Obama and the Democrats maintain that the president does not control the price of oil and therefore should not be blamed for rising gas prices. The Democrats did not feel that the president was so helpless when George Bush resided in the White House, however. Many blamed President Bush’s ties to the oil industry for 2008’s record spike in gas prices.

While it is true that President Obama cannot take action that will swiftly bring gas prices down, it is also true that many of his policies have contributed to the increase in gas prices. The president’s affinity for green energy and dislike for oil has led to policies that are hostile to oil producers. For example, although President Obama has taken credit for the fact that U.S. oil production is at an eight year high, he failed to mention that the increase was due to drilling permits issued under President Bush.

According to the Institute for Energy Research, the number of offshore drilling permits has fallen by more than 50 percent under President Obama. The percentage of applications approved has fallen from a historical average of 73 percent to the current approval rate of 23 percent. Approval time has increased from an average of 60 days to more than 90. The Obama Administration was held in contempt for continuing its moratorium on off-shore drilling after its executive-ordered ban was struck down by a federal judge. Even before the oil spill, one of President Obama’s first executive actions was to cancel 77 Bush-era oil leases in Utah. Further, the Obama Administration has also unveiled new regulation of fracking, the drilling technique that has made the oil and natural gas booms in Pennsylvania, Ohio, and North Dakota possible. Increased regulation may well lead to fewer permits in these areas as well.

Another high profile decision was President Obama’s rejection of the Keystone XL pipeline. Obama killed the pipeline in January after three years of study. In February 2012, the president lobbied Democratic senators to vote down a Republican bill that would have approved the pipeline according to Investor’s Business Daily, killing the bill a second time. The Canadian oil that would have been piped to U.S. refineries will now likely go to emerging markets in China.

The Energy Information Administration cites the closure of three refineries since September 2011 that supplied gasoline to the East Coast as a factor in rising gas prices. An additional refinery may be shut down in July if no buyer is found. The reduced supply has been partially offset by a new refinery in Delaware City, but has undoubtedly contributed to higher prices. President Obama engineered the purchase of Chrysler by Fiat, but has shown no interest in finding new operators for these refineries.

The Federal Reserve has also increased the money supply through quantitative easing, where the Fed buys securities from banks and expands the money supply. According to the N.Y. Times, the Fed has added more than $2 trillion to the money supply since the economic crisis began in 2008. When more money is in the system, each individual dollar is worth less. As supply increases, demand decreases.

As Republicans on Congress’ Joint Economic Committee noted in report detailed in CNS News last year, “Oil is an international commodity that trades in dollars. The value of the unit of exchange, in this case the dollar, plays an important role in determining the ‘headline’ price for the underlying commodity.” The report further notes that the first round of quantitative easing resulted in an increase of more than $17 per barrel of oil. This is approximately an increase of more than 50 cents per gallon of gasoline.

Another major factor in the high price of gasoline is instability in the Middle East caused by the Iranian nuclear program. The Iranian quest for nuclear weapons predates the Obama Administration, but the president has frittered away time with fruitless negotiations while the Iranians worked and used diplomacy as a delaying tactic.

In the meantime, Obama has done everything possible to prevent Israel from launching a strike on Iranian nuclear facilities, even after Iran attempted a terror bombing inside the District of Columbia in October 2011. He is right that an Israeli strike would probably result in an Iranian blockade of the Persian Gulf causing oil prices to skyrocket, but he seriously underestimates Iranian Twelver religious fervor and their resolve to destroy Israel. The Iranian leadership believes that a Muslim messiah is coming soon and that their mission is launch a nuclear war to prepare the way for him.

A conventional war in the Middle East would be disastrous for oil prices. A nuclear war in the Middle East (or worse: one that reaches American shores) would be even worse. As the Iranians draw close to becoming a nuclear power, there is less time for sanctions to work and less chance for a peaceful solution. The price of oil includes a risk premium for the possibility of war in the Middle East that Obama’s inaction has made more likely.

Finally, President Obama is a bit disingenuous about wanting cheaper prices for gas and energy. In September 2008, Dr. Steven Chu, the man who later became President Obama’s energy secretary, told the Wall Street Journal, “Somehow we have to figure out how to boost the price of gasoline to the levels in Europe.” Chu wanted gas prices to increase in order to coax Americans into buying more energy-efficient cars and encouraging shorter commutes.

Barack Obama himself, in a January 2008 interview with the San Francisco Chronicle that can be heard on HotAir.com, said as a candidate that “under my plan of a cap and trade system, electricity rates would necessarily skyrocket.”  This would have been bad news for everyone, including people driven to purchase electric cars by Dr. Chu if cap-and-trade had passed. Although Congress never passed cap-and-trade, President Obama’s EPA is implementing carbon regulation unilaterally.

President Obama cannot personally control the price of oil, but his policies do have an effect on it. On balance, the president’s policies are contributing to the rising gas prices. The statements of candidate Obama and Dr. Chu are evidence that they knew exactly what they were doing all along.

Originally published on Examiner.com:

http://www.examiner.com/conservative-in-atlanta/obama-and-the-price-of-gas

Why gas prices are increasing

Drivers in Atlanta and around the country are noticing rising gas prices.  According to historical data from Atlantagasprices.com, the Atlanta average gas price is now $3.588, even higher than the national average of $3.543.  Atlanta area gas prices have risen over 13 cents per gallon in the past month and almost 50 cents per gallon in the past year.  A year ago, Atlanta gas prices were almost 10 cents below the national average.  Economists predict that $4 gas will be a reality this summer and could rise even higher.

In the past half century, oil prices have historically fallen during recessions and then climbed again as the economy improved. This pattern was seen in 2008 as gas prices fell from record highs in the summer to sharp lows after the onset of the economic crisis in August.  According to this historical view, gas prices could be expected to rise as the economy recovers.

The problem with this theory is that, as Dick Morris recently pointed out, the current economic recovery is an illusion.  Changes in the way financial metrics are calculated and cherry-picked statistics mean that while a recovery appears to be underway statistically, the reality is that most Americans are not experiencing it.  As Morris notes, the stock market may be up, but the volume of trading is down because most ordinary Americans are no longer in the market.  The housing markets are still not recovering four years after the real estate bubble burst in 2008.  Housing starts are still at 20 year lows according to the National Association of Home Builders.  Foreclosure rates are up while the average sale price of homes is down according to RealtyTrac.  Georgia remains one of the highest foreclosure states.

Unemployment rates may be down marginally, but it isn’t because more Americans are working.  The Bureau of Labor Statistics changed the population estimates used in determining the unemployment rate in January 2012 just before the rate took a downward plunge.  The BLS notes that “these annual population adjustments affect the comparability of household data series over time” because previous data was not corrected.  Unlike the unemployment rate, the civilian labor force participation rate has not shown signs of recovery.  Similarly, Gallup’s employment survey remains flat.

Even though the U.S. economy isn’t in recovery, other countries are doing better.  Growing economies such as that of China are demanding more oil, which causes the price to increase around the world.

In the absence of a recovery, there are other reasons for the increase in gas prices.  One obvious factor is inflation.  According to a January 2012 report from the Bureau of Labor Statistics, the core inflation rate was only 2.3 percent in 2011.  This rate does not include food and energy, however.  Energy costs have risen by 6.1 percent over the past year, while food costs are up by 4.4 percent. 

One reason for the inflationary costs is the Federal Reserve’s policy of quantitative easing.  The Fed has tried to stimulate the economy by injecting more dollars into the economy.  A basic principle of economics is that when supply increases, price decreases.  In the case of quantitative easing, this means that as the Fed orders more dollars into the system, the value of each individual dollar decreases.  Each dollar buys less as a result.  This means that interest rates stay low, which helps borrowers.  A problem, however, is that imported goods, like barrels of oil, cost more dollars because each dollar is worth less.

Another factor in the rising oil and gas prices is the unrest in the Middle East.  Oil prices often rise and fall with tensions in oil producing regions.  The Iranian nuclear crisis is bringing the region to the brink of war with the possibility of an Israeli strike on Iranian nuclear facilities.  Secretary of Defense Leon Panetta told GasBuddy.com that if Israel attacks Iran oil prices, currently at about $100 per barrel, could go anywhere “between $200 and pick-a-number.”  There is also a civil war raging in Syria and unrest in Egypt in the aftermath of the Arab Spring revolt there.  There is also uncertainty over the future of Afghanistan and Iraq, another major oil producer, as U.S. military operations in those countries end. 

Other factors are at play as well.  The Obama Administration’s decision to cancel the Keystone pipeline means that American refineries are denied a source of cheap oil from Canada.  Similarly, Obama has made it difficult and expensive to drill for oil domestically and off U.S. shores, which means that the supply of oil is artificially limited, keeping prices high.  Ironically, the oil from Canada that would have gone to U.S. refineries is likely to go to China after President Obama’s decision.

Other factors, such as weather and refinery closures can also affect the supply of oil and therefore the price.  These factors are reported and analyzed weekly by the Energy Information Administration on its petroleum page.  For example, there have been several Caribbean refineries that previously sent gasoline to the U.S. east coast have closed recently according to the February 23 report.

In the end, there are only two ways to reduce the price of oil and gasoline.  Either the supply must be increased or demand must be reduced.  The Obama Administration is taking only token steps to expand oil exploration and drilling, while demand continues to increase around the world.  Demand will likely continue to rise unless the upward pressure of oil prices or some other factor causes the world to slide back into recession.

This article originally published on Examiner.com:


http://www.examiner.com/conservative-in-atlanta/why-gas-prices-are-going-up-1

Why gas prices are going up... and how to stop them

Gas prices have risen sharply over recent weeks and are forecast to continue rising.  According to Atlantagasprices.com, local gas prices have risen by almost thirty cents in the past month and by a dollar in the past year.  Atlanta’s gas prices are about nine cents cheaper than the national average, but have risen at the same rate.  According to a forecast by the U.S. Energy Information Administration, gasoline prices could exceed four dollars per gallon this summer.

To find out when the country will get relief from these high gas prices, it is first necessary to understand why they are rising in the first place.  One reason that gasoline prices are higher is that it is almost summer.  Refiners use a different recipe in summer months to create a “summer blend” gasoline.  Cheaper additives used in winter tend to evaporate and cause pollution in the warmer summer months.  Federal and local laws require different additives in summer to preserve air quality, but more expensive additives tend to drive up the price.  Additionally, as refiners change blends shortages can result that drive up prices further.  Federal law requires the sale of the summer blend from June 1 to September 15, but some local governments have their own timeline.  To have the product in stations prior to June 1, production must start in March or April. 

One good thing about the switch is that is that most drivers will notice a slight increase in fuel economy when using summer blend gasoline.  This is because there is more gasoline in the mixture and fewer total additives than in winter gasoline.

The U.S.E.I.A. Short Term Energy and Summer Fuels Outlook (April 12, 2011) mentions two other factors in the rising price of gasoline and oil.  First, one component of rising oil prices is due to growth in demand as the world and U.S. economies finally recover from the recession.  Second, oil supplies are being reduced by the disruption of Libyan oil exports and the continuing unrest in the Middle East.

Looking back through history, it is easy to see a pattern in which oil prices rise sharply and the economy subsequently plunges into a recession.  These oil shocks have occurred several times in the past fifty years.  The Arab oil embargo of 1973 led to the first oil shock and a major recession from 1973 to 1975. A second occurred in 1979 with the Iranian Islamic Revolution and was followed by the recession of 1980 to 1982.  A smaller spike occurred in 1990 with the Iraqi invasion of Kuwait and another in 2001 after the 9/11 attacks.  The most recent oil shock occurred in the summer of 2008.

Oil shocks typically cause a decline in the demand for oil as prices rise, but they also cause a decline in the demand for other goods and services as well.  The reason for this is two-fold.  If consumers are spending more at the pump, they have less money to spend on other things.  Second, the prices of other things are rising as well because oil and gasoline are used to manufacture and transport a large number of products.  As demand falls off, companies earn less in sales and therefore produce less.  The economy shrinks into a recession.  This was illustrated in vivid detail in 2008 as the price of oil collapsed after the economy crashed.

Conversely, the rising price of oil is an incentive for producers to produce more oil.  Oil reserves that were not economical to tap at lower prices are suddenly more attractive.  Other producers, such as OPEC countries, have historically ignored production quotas to take advantage of rising prices as well.  The increase in the supply of available oil on the market drives the price down.  Eventually, supply and demand reach an equilibrium at a lower price.

The crisis in Libya has also helped to drive up oil prices around the world.  Even though Libyan oil primarily supplied Europe, when Libyan production was lost European companies had to look elsewhere for oil to meet their needs, driving prices up.  In the ongoing struggle, Libya is estimated to have lost two-thirds of its oil production.  Prior to the war, Libya ranked 17^th in world oil production with most of its exports going to Italy and Germany.  The disruption is the eighth largest oil disruption in modern history.

There is still more unrest in the Middle East as well.  The “Arab Awakening” has spread from Tunisia and Egypt throughout the Arab world.  The uprisings have not yet reached Saudi Arabia, the world’s largest oil producer, but Saudi forces have intervened militarily to support the ruling family in neighboring Bahrain.  Unrest in more oil-producing countries would have a further upward pressure on the price of oil.  As always, Iran’s nuclear ambitions also threaten the region.

There are other factors in the price of oil that are not discussed in the Energy Information Administration’s brief.  Chief among these is the Obama Administration’s moratorium on off-shore drilling.  Originally, President Obama had announced a plan in March 2010 to allow drilling in the eastern Gulf of Mexico and parts of the Atlantic.  After the BP oil spill, Obama reversed his decision and temporarily banned offshore drilling in waters deeper than 500 feet.  He lifted the ban (which was struck down by the courts in its original form) in October, just prior to the midterm elections, and kept the ban on the eastern gulf and Atlantic. 

Even after the ban was lifted, the Administration dragged its feet on issuing drilling permits to the point where oil companies sued the Department of the Interior.  Again, the courts found in favor of the oil companies and agreed that the new rules issued after the ban was lifted imposed an informal moratorium.  The government continued its policy of delaying permits and was found in contempt by a U.S. district judge in February 2011. 

Ironically, while American oil companies are banned from drilling in the Gulf of Mexico, other countries are not.  Cuba has sold drilling rights to more than a dozen countries including Russia, Sudan, Myanmar, and Vietnam.  China is currently negotiating leases with Cuba that would allow drilling within 45 miles of Florida.

Another government policy that has a negative effect on oil prices is quantitative easing.  The Federal Reserve, led by Ben Bernanke, has been increasing the money supply by buying government bonds.  As more money enters the market each dollar is worth less because price falls as supply increases.  Each dollar will buy less because it has been devalued.  This is called inflation. 

Bernanke does not believe that his inflationary policies affect the price of oil, but logic dictates that if each dollar used to purchase a barrel of oil is worth less then the oil producers will want more of them for their product.  If a barrel of oil is sold for more dollars than before, the price of the gasoline it produces will also increase.  Essentially, Bernanke agrees that inflation is likely, but doesn’t think it affects oil prices.

One factor in oil prices that is likely not a major problem is speculation.  In another flashback to 2008, President Obama is again demonizing commodities traders as speculators who are driving up the price of oil.  A quick comparison of the current OPEC basket price for oil and recent futures prices for oil on the Chicago Mercantile Exchange. 

On April 25, the OPEC basket price was $119.38 per barrel.  In contrast, the futures prices listed for the close of trading on April 26 are in the $112 to $113 range for the next year.  It seems that traders are betting that the price of oil will actually decrease slightly from its current level rather than forcing the price up.  Similarly, Oil-Price.net shows the current price of oil at $112.13 which is less than the basket price being charged by the oil-producing members of OPEC.

There are several things that President Obama could do to help alleviate rising oil prices.  The most obvious is increasing the supply of oil available to help keep prices down.  In July 2008 President Bush lifted the presidential ban on offshore oil exploration and called on Congress to rescind a congressional ban.  The effect was an immediate decrease in the price of oil even though new sites could not be drilled for years.  A similar move by Obama could reverse the trend of rising oil prices and prepare new oil fields that will help relieve the American dependence on foreign oil.  Unfortunately, Obama’s policy has been the opposite with bans on offshore drilling and a resistance to issuing new drilling permits.

Second, President Obama could take steps to secure Middle Eastern oil fields.  This might mean politically unpopular moves such as expanding the U.S. role in Libya to topple Gadhafi.  If the U.S. and NATO intervene with ground troops to break the stalemate between Gadhafi and the rebel forces, Libyan oil production could recover to full capacity.  President Obama is unlikely to commit more U.S. forces in what is already an unpopular war.  This is especially true considering Obama’s anti-war base and Democratic criticism of the Iraq War as a “war for oil” as well as the president’s indecisiveness on military matters.

Another option that could give consumers some relief would be to declare a gas tax holiday.  In June 2008, Georgia Governor Sonny Perdue stopped a scheduled increase in the Georgia gas tax as prices approached record highs and suspended the gas tax entirely in the wake of Hurricane Katrina in 2006.  The Georgia gas tax is automatically scheduled to increase on May 1.  The increase is tied to rising gas prices.  The new rate will be an increase of 2.8 cents to a total of 12.9 cents per gallon.  The federal gas tax is even higher at 18.4 cents per gallon. 

By not collecting gas taxes, President Obama would cut the price of gasoline at the pump by almost twenty cents per gallon.  The problem is that this is a temporary fix that would do nothing to address the problems of supply and demand that drove prices up in the first place.  Many believe that a better course would be to enact broader tax reform for more permanent relief.  In any case, President Obama is unlikely to push for a tax cut of any sort.

If all else fails, Americans can still expect the price of oil to fall.  As history has shown, the price of oil generally falls when the economy enters a recession.  Oil at $100 per barrel might not be enough to cause a recession by itself, but in the current weakened economy it is far from the only negative factor.  Worries over deficit spending, the negative effects of Obamacare, the possibility of rising taxes, and new regulations that are strangling business are all combining to slow the recovery.  It seems increasingly likely that Obama’s policies and world events are combining to cause a double-dip recession that will ultimately at least give consumers some relief at the gas pump… if they still have jobs.

http://www.examiner.com/conservative-in-atlanta/why-gas-prices-are-going-up"> 

Even $4 gas doesn't make "green" cars cost effective

President Obama in a Chevy Volt

As the Libyan crisis sends oil prices skyward, many Georgians may be considering the purchase of a hybrid or electric car.  Hybrids, such as the Toyota Prius, have become popular in recent years.  More recently, electric cars such as the Chevy Volt have been introduced.

According to Gasbuddy.com, the average gas price in Georgia has risen to $3.43 per gallon.  According to the Energy Information Administration, this is still below the national average of $3.56.  California’s average price topped the nation at $3.96. 

Again according to the E.I.A., until this year national average gas prices had hovered in the $2.70 range since the end of the gas spike of 2008 and the beginning of the recession.  The current national average represents an increase of about $1.25 over the price for the last two years.  Those drivers considering buying a hybrid should consider whether a hybrid or electric car is more cost effective than a traditional gas-powered economy car.

To determine whether a “green” car is cost effective, compare them to traditional gasoline-driven cars.  The new Chevy Volt is an electric car.  The website of Jim Ellis Chevrolet in Atlanta lists a 2011 Volt at $44,695.  For comparison, Sandy Springs Ford offers a 2011 Ford Focus for $14,999, a difference of $29,696. 

Assuming that gas prices continue to rise to $4.00 per gallon, as some in President Obama’s administration might like, a driver would have to purchase more than 7,424 gallons of gas for their Focus.  Assuming all city driving at an efficiency of 24 MPG, this would mean driving more than 178,176 miles.  According to the Federal Highway Administration, the average driver only drives 13,476 miles per year.  At that rate, it would take over thirteen years for the Volt to break even.  The mileage would be even higher if more driving is done on the highway where fuel efficiency is greater. 

A similar comparison can be done with a hybrid auto.  The Japanese earthquake has caused a temporary increase in the price of the Toyota Prius as supplies of the car from Japan have been interrupted, but other hybrids and electric cars are available on the market at normal prices.  For example, Ford offers a Fusion hybrid with a suggested retail price of $28,800.  This is only $13,801 more than the conventionally powered Focus. 

Ford Fusion

The problem with the hybrid is that its fuel economy is only marginally better than the gasoline focus.  The Fusion gets 41 MPG on the highway and 36 in the city, while the Focus is rated at 35 MPG on the highway and 24 in the city.  The difference is larger for city driving where the Focus’ electric motor runs more than its gasoline engine.   The average of the two is 8 MPG in favor of the Fusion.

The price difference in the two cars divided by $4 per gallon of gasoline means that it would take 3,450 gallons of gas to make the more expensive Fusion break even with the Focus.  In city driving where the Fusion is more efficient, that amount of gasoline would carry a Focus 82,800 miles and a Fusion 124,200 miles.  Based on the FHA’s annual average mileage, that would take about nine years.  

There are other details to consider as well.  Depending on where you live and when you buy, there might also be government subsidies, tax credits or corporate incentives that would make a “green” car more financially attractive.  Conversely, the resale value of these cars has not been thoroughly established since the technology is new and the number of used hybrids and electric cars on the market is relatively small. Further, the reliability of the batteries that power the electric motors in “green” cars is untested beyond a few years.

A big deciding factor in whether to buy a “green” car is where and how much it will be driven.  If the car will be used primarily to drive short distances in the city, a “green” car will be more attractive than if it will be used on the highway for longer distances, where the efficiency advantage of the electric motor is negated.  For cars that are only driven a few thousand miles per year, a conventional gasoline powered car is likely to be more cost effective unless gas prices rise much higher than they are today.  A “green” car would not be as attractive for a commuter from Atlanta’s outlying suburbs as it would for someone who lives downtown, but drives a high number of miles around the city.

A “green” car would also be unattractive as a family auto.  Most green cars are the size of compact cars that are unsuited for hauling children and the assorted paraphernalia that parents need to keep them fed, happy, and safe.  A “green” minivan may be years away from the market.  Likewise, heavy trucks needed on farms or for hauling trailers and equipment have no competition in the “green” marketplace.

Many conservatives consider the government’s support of “green” autos to be another example of ill-advised subsidies for favored companies.  Even with subsidies, these cars are expensive, inefficient and do not meet the needs of most families.   In a time of high deficits and national anxiety over debt, such subsidies may be out of place.  If the government stays out of the market, consumers might eventually decide to embrace “green” cars as a response to rising gas prices.  Alternatively, government subsidies of favored companies might crowd out new technologies that are even more promising than hybrids and electric cars.  The question is whether most Americans prefer to have the government choose the new technologies that bureaucrats deem best or to allow consumers to make their own choices free of government interference.

http://www.examiner.com/conservative-in-atlanta/even-4-gas-doesn-t-make-green-cars-cost-effective">